San Leon announced the revised terms of the proposed farm-in agreement that will see Horizon General, a subsidiary of Aspect Energy, take half of San Leon’s 45% working interest in the Cybinka and Torzym concessions in Poland’s Permian Basin,
To earn its 22.5% working interest in the concessions, Horizon has agreed to pick up the tab in respect of San Leon’s share of the costs of the planned fracture stimulation (frack) of the Sosna-1 exploration well.
Horizon’s financial commitment in respect of the gross costs has been capped at €1.5mln.
The Sosna-1 well will evaluate the commerciality of the unconventional Main Dolomite play.
As well as fully funding San Leon’s share of the costs of fracking the Sosna-1 exploration well, Horizon will take on San Leon’s share of the costs of the drilling, completion and testing of a Torzym well up to a gross cost of €6mln.
Horizon will also pay up to €6mln in gross costs, being San Leon’s share of the costs of an additional exploration well within the concessions targeting the Permian Main Dolomite and/or production facilities.
The other partners in the Cybinka and Torzym concessions are SNGN Romgaz, which has a 30% stake, and Sceptre Oil & Gas, which owns a 25% working interest.
"This farm-out covers San Leon's expected costs to fracture the Sosna well and drill two wells in the Torzym and Cybinka areas,” said Oisin Fanning, chairman of San Leon.
“Success in these operations will deliver material upside to San Leon's holdings in the concession at no cost to the company and will have a direct read across to our other blocks in the Permian Basin. If the Torzym well is successful, we have built flexibility into this agreement, and included a carry on costs, to install the facilities necessary to bring the resource into production as early as possible," he added.
Broker finnCap said the signing of a letter of intent, though still subject to the usual partner approvals, is “positive news” for San Leon, “as it reduces its capital exposure to these licences”.
Shares in San Leon were up 0.6% at 3.93p in a falling market in the first hour of trading.